Chapter 3

Question 1

Define Free Trade

Answer 1

The movement of goods and services among nations with no political or economic barriers.

Question 2

What is importing

Answer 2

Buying goods or services from a foreign nation

Question 3

What is exporting

Answer 3

Selling goods or services to a foreign nation

Question 4

What does Comparative Advantage Theory state

Answer 4

That countries should sell to other nations those goods and services that it produces most efficiently and buy from other nations those it does not produce efficiently

Question 5

What is an Absolute Advantage

Answer 5

When a nation produces a product more efficiently than all other nations.

Question 6

Name and describe the two indicators global trade is measured by

Answer 6

1. The balance of Trade is the total volume of a nations exports compared to its imports over a period of time.
2. The balance of payments is the difference between money coming in and money leaving from other factors such as tourism

Question 7

What is dumping

Answer 7

an unfair practice of selling P&S cheaper in foreign countries than domestically

Question 8

What are the six strategies for reaching global markets

Answer 8

1. Licensing
2. Exporting
3. Franchising
4. Contract manufacturing
5. International Joint Ventures and Strategic Alliances
6. Foreign direct investment (FDI)

Question 9

What are four forces that affect trading in gobal markets

Answer 9

1. Sociocultural forces
2. Economic and Financial Forces
3. Legal and Regulatory Forces
4. Physical and Environmental forces

Question 10

What is trade protectionism

Answer 10

The use of gov. regulations to limit the importation of G&S

Question 11

Define import quota

Answer 11

limits the number of products in certain categories a nation can import

Question 12

What is a tariff

Answer 12

A tax on imports designed to make them more expensive to buy

Question 13

What is the WTO

Answer 13

World Trade Organization; organized to mediate trade disputes

Question 14

What is a common market

Answer 14

is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members

Question 15

What is NAFTA and what are its key objectives

Answer 15

North American Free Trade Agreement

1. eliminate trade barriers and facilitate cross borders movement of G&S
2. Promote conditions of fair competition
3. increase investment oppurtunities
4. enforce and protect intellectual property
5. Establish frame work for further regional trade
6. improve working conditions in NA, MX, and Canada

Question 16

What is the USMCA

Answer 16

United States-Mexico-Canada Agreement, a revision to NAFTA

Question 17

What is offshore outsourcing

Answer 17

the outsourcing of low wage global markets.

Question 18

Name three reasons nations should nations trade with other nations

Answer 18

1. No nation is completely self-sufficient
2. other countries need products prosperous countries produce
3. natural resources and technologies are not equally distributed around the world

Question 19

What is a multinational company

Answer 19

One that not only imports or exports, but also has manufacturing and other physical presence in foreign nation.

Question 20

Name and describe the two types of tariffs

Answer 20

1. Protective tariffs raise the price of foreign products

2. Revenue tariffs raise money for the government

Question 21

What is an embargo

Answer 21

Prohibits the importing/exporting of certain products or from certain nations